April 2013: Economic sentiment declines markedly in both the euro area and the EU

In April the Economic Sentiment Indicator (ESI) decreased by 1.5 points in the euro area (to 88.6) and by 1.8 points in the EU (to 89.7).

Economic sentiment indicator (s.a.)

April EU: 89.7 - Euro Area: 88.6

Euro area developments

In the euro area, the ESI's decline was broad-based across all business sectors, with services witnessing the sharpest drop, while consumer confidence went up. Among the five largest euro area economies, economic sentiment worsened significantly in Germany (-2.3), France (-2.0) and Italy (-1.9), while remaining broadly stable in the Netherlands (+0.2) and improving in Spain (+0.9).

The decrease in industry confidence (-1.5) resulted from a much more negative assessment of the current level of overall order books and lower production expectations. Managers' assessment of stocks of finished products remained virtually unchanged. The past production and, to a lesser extent, the current level of export order books, which are not included in the confidence indicator, were also assessed more negatively. Services confidence dropped abruptly by 4.1 percentage points, driven by significantly worsened assessments of the business situation and demand over the past three months. Demand expectations deteriorated to a lesser extent. Consumer confidence increased by 1.2 points, based on a marked easing of unemployment expectations and slightly better expectations concerning households' future financial situation, the future general economic situation and savings over the next 12 months. Retail trade confidence decreased by one point, driven by worsened business expectations and views on the adequacy of current stocks. The assessment of the present business situation worsened only slightly. Also construction confidence decreased (-1.3), based on weaker employment expectations and assessments of order books. Financial services confidence (not included in the ESI) improved markedly (+5.0), fuelled by considerably better assessments of the business situation and demand over the past three months. Demand expectations improved slightly.

Employment plans were revised downwards across business sectors, contrasting with the easing of consumers' unemployment expectations. Selling price expectations decreased in industry, retail trade and construction, and increased marginally in services.

EU developments

In the wider EU, the decrease of the ESI was slightly more marked (-1.8). On a sector basis the reason for this was a sharper deterioration of confidence in services (-5.4) and construction (-3.5) compared to the euro area. Regarding the largest non-euro area EU economies, economic sentiment deteriorated significantly in both the UK (-2.0) and Poland (-1.7). As in the euro area, EU financial services confidence improved strongly (+4.8).

Similar to the euro area, employment plans worsened across all business sectors and selling price expectations decreased with the exception of the service sector. Consumers' price expectations decreased significantly in both the euro area and the wider EU.

Quarterly survey in manufacturing (conducted in April)

In the euro area, managers reported no changes in the number of months of production assured by orders on hand compared with the previous survey carried out in January. However, managers' assessment of developments in overall new orders worsened again after last quarter's improvement and their appraisal of their competitive position on foreign markets outside the EU deteriorated mildly. At the same time, export volume expectations went up for the second consecutive quarter. The balance of managers reporting more than sufficient, rather than insufficient, production capacity increased. However, the estimated rate of capacity utilisation remained unchanged at 77.5%.

Developments in the wider EU were largely in line with euro area developments. Contrary to the euro area, managers' assessment of their competitive position on foreign markets outside the EU improved mildly. The capacity utilisation fell slightly, to 77.6%.

Industrial investment survey (conducted in March/April)

According to the bi-annual investment survey carried out in March/April this year, real investment in the manufacturing industry is expected to increase by 1% in the euro area in 2013. In the previous survey conducted in October/November of last year managers expected a decrease by 1%. As for 2012, managers now estimate a growth of 2%, compared to a decline by 2% estimated in October/November.

In the wider EU, real investment growth in manufacturing is expected to speed up to 3% in 2013, while the October/November survey pointed to flat investment. Regarding 2012, the current estimation points to a 4% increase compared to 1% as estimated in October/November.

Industrial confidence indicator (s.a.)

April EU: -12.9 - Euro Area: -13.8

Service confidence indicator (s.a.)

April EU: -10.6 - Euro Area: -11.1

Consumer confidence indicator (s.a.)

April EU: -20.4 - Euro Area: -22.3

Retail trade confidence indicator (s.a.)

April EU: -13.5 - Euro Area: -18.1

Construction confidence indicator (s.a.)

April EU: -33.7 - Euro Area: -31.8

Financial services confidence indicator (n.s.a.)

April EU: 11.1 - Euro Area: 1.5

The next Business and Consumer Survey is due to be published on 30 May 2013.